Two months earlier in June 2006, the Centers for Medicare and Medicaid threatened to cut off funding to the HMO after determining that Kaiser's kidney transplant program had failed to provide adequate care to patients waiting to receive a kidney transplant.
The CMS released a damning report on June 23, that said the program was understaffed, its record keeping and training were nonexistent or inadequate, and that some patients were not matched up with kidneys, even when a perfect matches was available. The CMS also said patients received confusing information and in many cases, patient complaints were lost or ignored.
The program was poorly planned, poorly staffed, poorly run and poorly qualified to care for transplant patients, CMS inspectors wrote in the report. And as the program faltered again and again through late 2004 and 2005, no one at the HMO even seemed aware that patients were at risk, the report said.
The report says that a UC Davis transplant coordinator warned Kaiser back in May 2004, before Kaiser launched its plan, that Sacramento-area patients "would have to wait 1.5 to 3.6 years longer for transplantation, depending on blood type" because they would be getting their organs from a different source.
But according to the report, Kaiser did not notify patients of the longer waiting times, nor did it sufficiently inform Medicare patients that they could obtain transplants at UCSF or UC Davis if they were willing to pay the higher deductibles of non-Kaiser patients.
However, Kaiser got a reprieve in a letter dated September 12, 2006, in which the CMS withdrew the threat to cut off funding based on a survey conducted on August 18, 2006, that showed the deficiencies had been corrected and Kaiser was now in compliance with federal standards.
According to the September 14, 2006 LA Times, had the deficiencies not been corrected to the inspectors' satisfaction, "Kaiser could have lost federal funding not just for transplant patients but for all Medicare patients with end-stage renal disease treated by the HMO's San Francisco hospital."
The LA Times and CBS News TV Channel 5, exposed the story about the failed kidney transplant program in early May 2006.
Prior to starting its own transplant program, Kaiser outsourced transplant procedures to non-Kaiser medical centers, including the University of California, San Francisco and the UC Davis Medical Center in Sacramento.
In mid-2004, Kaiser cancelled contracts with UC San Francisco and UC Davis and sent a form letter to more than 1,500 Kaiser patients awaiting transplants at those medical facilities, stating that Kaiser would no longer pay for transplants at outside hospitals and patients would be transferred to Kaiser's new kidney transplant program.
The transfer of patients involves registration with the federal contractor, United Network for Organ Sharing, responsible for overseeing kidney distribution. A patient is not eligible to receive a kidney without proper registration.
The Times reported that Kaiser launched its transplant program "without holding basic discussions with regulators about how to safely transfer up to 1,500 of its patients from other programs to its San Francisco center."